Covid-19 impact on airlines 'severe': IATA

Covid-19 impact on airlines 'severe': IATA

Cash reserves key to survival amid slump

Thai Airways International planes are grounded at Suvarnabhumi airport. The national carrier, along with most other Thai-registered airlines, has stopped flights temporarily. (Photo by Varuth Hirunyatheb)
Thai Airways International planes are grounded at Suvarnabhumi airport. The national carrier, along with most other Thai-registered airlines, has stopped flights temporarily. (Photo by Varuth Hirunyatheb)

Thai Airways International (THAI) operated its last international service out of Suvarnabhumi International Airport Wednesday, before the flag carrier goes into an "operational hibernation" because of the Covid-19 pandemic.

Flight TG920 bound for Frankfurt, Germany took off at 5.15am on Wednesday, more than five hours later than usual. The flight took off with a grim warning in its wake.

The International Air Transport Association (IATA) published an analysis which shows that airlines may burn through US$61 billion (about 2 trillion baht) of their cash reserves in the second quarter of the year, which ends on June 30, while posting quarterly net losses of about $39 billion.

THAI and several other Thai-registered airlines have made the painful decision to halt their flights this month, although some continue to run limited domestic services. However, experts said flights are likely to be grounded for as long as the Covid-19 outbreak is uncontained. Passenger traffic has dried up since the lockdown of cities was introduced and people's movements restricted.

In the early hours of Wednesday at Suvarnabhumi airport, a Thai woman was over the moon when she heard THAI ground staff had removed her from the waiting list and put her on the Frankfurt-bound flight.

"It's a delight to know I'll be on the flight.

"If I don't get to travel today, I won't know when I can travel again. My family back in Germany is worried sick about me," she said.

THAI announced on its webpage that it is suspending flights until May 31. In the meantime, the national carrier's top executives have scheduled meetings to turn the financially-ailing airline -- once a profitable state enterprise -- around.

The airline is reportedly looking to introduce deep pay cuts across the board, adopt new austerity measures and downsize the operations of its affiliated businesses.

Before THAI decided to ground most of its planes, many of its flights were booked out as suspended carriers transferred their passengers on THAI flights. Demand was high as the number of anxious travellers wishing to escape further travel restrictions rose by the day.

TG920 was THAI's last chance to clear up its backlog of passengers. Two days ago, THAI staff at Suvarnabhumi were swamped with around 3,000 travellers heading for Europe. Some had been rerouted and were now transiting through the airport, according to a THAI official.

Those looking to check in to the flights saw queues stretching up to the entrances of the departure terminal, which prompted THAI cabin crew and even pilots who had been suspended to help out, directing people to self-check-in facilities and answering customer queries.

IATA said the impact of the Covid-19 outbreak on the aviation industry will be "severe", as revenues could fall by up to 68%.

This is less than 71% fall in demand Iata had expected previously, as airlines decide to continue their cargo operations, albeit at reduced levels.

"Airlines cannot cut costs fast enough to stay ahead of the impact of this crisis. We are looking at a devastating net loss of $39 billion in the second quarter," said Alexandre de Juniac, IATA's director-general and CEO.

IATA said it expected semi-fixed costs (including crew costs) to be reduced by a third although many airlines are trying to preserve their workforce and businesses for future recovery.

On top of unavoidable costs, airlines are also faced with the burden of refunding sold but unused tickets as a result of massive cancellations which stem from government-imposed travel restrictions. Iata estimated the airlines' liabilities to reach a colossal $35 billion in the second quarter.

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